Telco is looking less safe as a haven for investors

Telstra’s
1.4 million retail shareholders have every reason to be concerned about the national broadband network (NBN) asbestos scandal – and not necessarily because of the possibility of an avalanche of expensive claims from families and workers exposed to deadly materials.

Despite incidents in various parts of the country where households may have been exposed to dangerous asbestos fibres as part of the NBN construction process, Telstra is adamant it does not face material financial risks at this stage.

The company has been on the front foot in admitting responsibility for the incidents, but has resisted calls to establish a compensation fund for potential victims, arguing any claims, (which at this stage still appear to be limited to a handful) are better dealt with on a case-by-case basis.

The sheer scale of its balance sheet and the value chief executive
David Thodey
places on its image in the eyes of its customers mean it deserves the benefit of any doubt on both matters.

Yet the asbestos scandal still has the potential to alter sentiment towards the nation’s most widely held stock significantly. This is particularly in the eyes of small investors, who have been the marginal buyers during the stock’s recent ascent to eight-year highs, while institutions, both domestic and offshore, have been trimming exposure.

With thousands of pits and ducts still to be remediated, the asbestos issue is not going away any time soon. And with asbestos, rather than the company’s booming mobile business or its juicy dividend yield poised to dominate the headlines, and the liabilities theoretically limitless, Telstra’s safe-haven credentials may seem less appealing.

It all amounts to the kind of “black swan" event that is investors’ worst nightmare – equally as impossible to predict as it is to measure the true damage. Meanwhile those looking for an excuse to sell out after a doubling in the share price in the past two years now have one. Suddenly, the path of least resistance seems lower. The asbestos incidents have also given the government an opportunity to deflect criticism away from NBN Co, which has suffered its own public relations mishaps in recent weeks.

The man many view as a potential Labor leader after the election,
Bill Shorten
, attacked the telco and revealed he had written to Telstra as far back as 2009 on asbestos issues. Thodey has worked hard to restore relationships in Canberra and will not be enjoying a return the political spotlight.